Technical paper
The forward smile in local–stochastic volatility models
The Authors introduce a closed-form approximation for the forward implied volatilities.
The convenience yield implied in the European natural gas markets: the impact of storage and weather
This paper aims to determine the convenience yield implied in the European natural gas markets by investigating driving factors and according dynamics.
Numerical solution of the Hamilton–Jacobi–Bellman formulation for continuous-time mean–variance asset allocation under stochastic volatility
The paper deals with robust and accurate numerical solution methods for the nonlinear Hamilton–Jacobi–Bellman partial differential equation (PDE), which describes the dynamic optimal portfolio selection problem.
Operational risk modelled analytically II: classification invariance
In a simple model, Vivien Brunel establishes the properties of an operational risk model under the requirement of classification invariance
Risk optimisation: the noise is the signal
Benedict Burnett, Simon O’Callaghan and Tom Hulme introduce a new method of optimising the accuracy and time taken to calculate risk for an XVA trading book. They show how to make a dynamic choice of the number of paths and time discretisation focusing…
High-performance American option pricing
This paper presents a high-performance spectral collocation method for the computation of American put and call option prices.
Adjusting exponential Lévy models toward the simultaneous calibration of market prices for crash cliquets
The authors propose so-called tail thinning strategies that may be employed to better connect the calibrated models to the crash cliquets prices.
Modeling redemption risks of mutual funds using extreme value theory
This paper shows how redemption risks of mutual funds can be modeled using the peaks-over-threshold approach from extreme value theory.
The impact of loan-to-value on the default rate of residential mortgage-backed securities
This paper analyzes the validity of using the loan-to-value (LTV) ratio to explain the behavior of mortgage borrowers at an empirical level.
An exact and efficient method for computing cross-Gammas of Bermudan swaptions and cancelable swaps under the Libor market model
A new simulation algorithm for computing the Hessians of Bermudan swaptions and cancelable swaps is presented.
The valuation of contingent convertible catastrophe debt under simple solvency and liquidity covenants
This paper studies a new write-off debt instrument (called CoCoCAT bond) whose writeoff is triggered by solvency and event-driven covenants.
Pricing swing options in electricity markets with two stochastic factors using a partial differential equation approach
This paper considers the numerical valuation of swing options in electricity markets based on a two-factor model.
Efficient computation of exposure profiles on real-world and risk-neutral scenarios for Bermudan swaptions
In the paper, real-world and risk-neutral scenarios are combined for the valuation of the exposure values of Bermudan swaptions on real-world Monte Carlo paths.
Relative performance persistence of financial forecasting models and its economic implications
This paper addresses the issue of model selection risk by examining whether a model’s past performance in forecasting expected returns provides an indication of its future forecasting performance.
From arbitrage to arbitrage-free implied volatilities
The authors propose a method for determining an arbitrage-free density implied by the Hagan formula.
Deriving derivatives
Andrei Soklakov shows how to incorporate traditional investment ideas and clients’ views into structured product design
The role of model risk in extreme value theory for capital adequacy
This paper studies the impact of model risk on EVT methods when determining the value-at-risk and expected shortfall.
MVA transfer pricing
Wujiang Lou extends liability-side pricing theory to initial margin
A simulation comparison of aggregation periods for estimating correlations within operational loss data
This paper investigates the differences in the values of correlations based on different aggregation periods of time series loss data.
How to turn uncertainties of operational risk capital into opportunities from a risk management perspective
Going beyond the regulatory requirements to operational risk measurement, the authors of this paper aim to provide relevant business applications to a bank.
The cost of cash and debit cards in Austria
This paper analyzes the cost of cash and debit cards in Austria both in terms of unit costs and scaled to the gross domestic product.
Wait a minute: the efficacy of discounting versus nonpecuniary payment steering
This paper investigates to what extent it is possible to steer consumers away from using credit card.
Not all payments are created equal: segmenting the payment landscape
This paper provides a broad perspective by taking into account payments globally in a comprehensive way: from card payments to real-time gross settlement
The econometrics of Bayesian graphical models: a review with financial application
This paper provides a review of graphical modeling and describes potential applications in econometrics and finance.